The beauty contest will be used to shortlist which telcos will be invited to join in the auction, based on their financial capability, commitment to network rollout and so forth.
The auction will differ from that used in other countries, in that there will be no cash payment upfront. Operators will pay a guaranteed sum each year for five years, after which they will hand over either that minumum payment, or a percentage of royalties from their 3G revenues, whichever is higher.
The auction bids will determine the minimum payment as well as the percentage of the royalties.
Secretary for information technology and broadcasting Carrie Yau told The Business Times that the innovative auction system was created to suit the "highly adverse market environment." She added that "there is also some doubt in the market about 3G services. In such an atmosphere, we have to consider the concerns of the industry."
The process is tailored to avoid passing costs onto consumers, while allowing the government to share in any profits, should 3G take off.
Successful bidders will be obliged to open their networks, making at least 30 percent of their capacity available to non-affiliated mobile virtual network operators and content providers.
Details of the auction will be released in April.
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